3 SMSF MISLEADING BELIEFS
1. YOU NEED TO BE WEALTHY TO HAVE AN SMSF
There is no mandatory minimum balance needed to open a self-managed fund. Although in saying that, there are administration and compliance fees involved in managing an SMSF therefore it may not be worthwhile for funds that have a low balance. For the 2014-15 financial year, ATO data showed nearly 25% of SMSF funds had a balance between $200,000 and $500,000 and at 30 June 2016 ATO data showed that the median balance was $362,000.. So think of this as a guideline however there is no blanket rule for whether an SMSF will work for you. Before jumping to conclusions, talk to an SMSF adviser to see what makes sense for you.
2. SMSF'S ARE A SIMPLE WAY TO BUY PROPERTY
Purchasing property through an SMSF means that it cant be lived in or rented by you, any other trustee of your SMSF or anyone related to the trustees. The bottom line is any related parties cannot benefit from the property in any way. It is also becoming more difficult to obtain finance to purchase a property in an SMSF as some of the big four banks along with some second-tier lenders no longer lend money to SMSF's.
3. SMSF'S ARE TOO RISKY
Being self-managed, you essentially take responsibility for all investments, insurances and management decisions. Much like other investments, balancing risk and reward comes down to getting the right advice and making smart choices. As a trustee of an SMSF, you’ll need to have the skills and understanding to manage your investments and your fund. The ATO heavily regulates SMSF's, and failing to comply can leave you with a range of penalties and fines. To reduce your risk, always seek professional advice and make sure you regularly review your investment strategy to factor in diversification, liquidity, solvency and insurance requirements of the fund.
While SMSF's are great for some, they’re not suited to others. If you’re considering opening an SMSF, the first step is solid advice and a sensible plan. For more information, talk to an Ben Atkinson at Peer Wealth by calling 02 8014 7608 today.
**Disclaimer: The material and contents provided in this article contains general information and does not take into account your personal objectives, financial situation or needs. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, please contact Peer Wealth on (02) 8014 7608.